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Market Talk- September 12, 2018

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Another day and another loss for some core Asian markets as concerns continue to spread. Both Shanghai and the Hang Seng opened weaker, but did mange to recover from the morning lows with even the occasional positive print. Both indices closed down around -0.3% placing them at nearly 14 month lows. The YTD decline for both of these indices is in excess of 25% with the currency also a cause for concern. What appeared to be a modest recovery was exaggerated late in the day for the off-shore CNH market. Talk is that many central banks were in unison maybe a little overdone, as movements such as these are rarely that well orchestrated – last seen 6.825. The Nikkei did manage to recover from early losses, but still closed down -0.3%. The Yen is nudging the 111 figure again as the safety bid appears to be trendy again. The SENSEX (+0.8%) was a ray of sunshine in a what appeared to be – sea of troubles. The INR also saw some strength as many anticipated RBI activity. The trend remains for a weaker currency even despite the occasional big play.

The much of the day, core European indices were struggling to recapture morning highs. At the very end of the day, news that US/China may have found a break-through, at least on talks, helped to exceed these AM highs. Core is still riding on the back of good BREXIT anticipation and is likely to turn on a headline if continues too far. Economic data is moving in the right direction, but remains extremely slow. Even volumes trading in markets are a worry, as the outlook is so unsettled. The Turkish Lira is still recovering some ground and made up 1.3% of that today. Last seen at 6.33 it still has way to go to get back into the 5 handles. DAX and FTSE both made up +0.5% today whilst the CAC added a near 1% on returns. A quiet day for bonds with small recovery seen in the core. The Euro, GBP, Yen and A$ all made ground against the USD today.

Both the NASDAQ and the S+P recovered well from their morning lows and even managed a positive close. Headlines that US/China are proposing renewed talks has helped confidence as well as the positive close. The trailing tech sector was culprit, once again, for dragging sentiment down. It is the hangover of regulation that causes the lacklustre trading, but some positive trade headlines really would deflect these concerns. Tomorrow could be an interesting day as we see some inflation data across the globe. Stocks are looking for an excuse to rally, while bonds are just holding in – tomorrows numbers could well be the start of Q4 fun and games.

Japan 0.10%, US 2’s closed 2.75% (+1bp), US 10’s 2.96% (-2bp), US 30’s 3.11% (-1bp), Bunds 0.41% (-2bp), France 0.71% (-2bp), Italy 2.94% (u/c), Turkey 19.37% (-21bp), Greece 4.04% (u/c), Portugal 1.85% (-3bp), Spain 1.46% (u/c) and UK Gilts 1.48% (-2bp).